TMI Blog2019 (2) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Judicial Member And Shri O. P. Meena, Accountant Member For the Assessee : Shri K. Shivaram/ Rahul Hakani (AR) For the Revenue : Shri Rajiv Gubgotra, Sr. D.R. ORDER PER O. P. MEENA, AM 1. These above two captioned appeals are filed by the Assessee which are directed against the orders of two separate order of learned Commissioner of Income-tax (Appeals)-2, Mumbai (in short the CIT (A) ) dated 25.06.2012 which in turn has arisen from separated order both dated 31.03.2010 passed u/s 271(1) (c) of the Income Tax Act,1961 (in short the CIT(A) ) passed by the DCIT-1(3), Mumbai (in short the AO ) for the A.Ys. 2003-04 2004-05 respectively. 2. We shall take up the first ITA. No.5379/M/2012 A.Y. 2003-04. 1 Ground No. 1 to 3 are states that the Ld. CIT (A) has erred in confirming the levy of penalty u/s 271(1)(c) of the Act of ₹ 8,64,784/- being 100% of the tax sought to be evaded on an erroneous assumption that the assessee has furnished inaccurate particulars of income to the extent of ₹ 23,53,154/-. 2. Ground No. 2 states that the Ld. CIT(A) has erred not passing speaking order in respect of the decision of the Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has reduced the amount of energy sales (in energy division) credited to the P L Account by amount of duty worth of ₹ 10,80,654/-. The AO quoted the provisions u/s 43B of the Act that tax can be claimed on payment basis, therefore, the claim of electricity duty is not an order similarly the assessee has retained an amount of ₹ 3,74,823/- being 10% of sale-tax set off and claimed that the same in the computation of income as deduction u/s 43B of the Act which is being set off, hence, can be allowed as per the provisions of Section 43B of the Act. The AO was of the view that had the assessment not picked up for scrutiny the wrong claim of the assesse would have escaped detection and, therefore, the appellant company could have walked away by suppressing its total income. Therefore, the AO has held that the assessee has furnished inaccurate particulars of income leading to concealment of income in respect of aforesaid additions/disallowances. Considering the same and placing reliance in the case of Union of India and others Vs. Dharmendra Textile Processors Ltd. (2008)(306 ITR 277) (SC) the AO levied the penalty of ₹ 8,64,784/- being 100% of the tax sought to be evad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Vithaldas Dhanjibhai Vs. CIT (1981)(130 ITR 95)(Guj)(High Court) wherein it was held that the reduction from bad debt reserve account is sufficient to claim deduction. However, in facts of present case, debtors have been reduced and so present case stands on a better footing. The CIT(A) has disallowed the claim on the ground that provisions for doubtful debts cannot be allowed after amendment to Section 36(1)(vii) of the Act. However, in the facts of the present case, debtors are actually reduced and provision is actually written off. Hence, the claim is allowable in view of the following decisions. Vijay Bank Vs. CIT (2010) 323 ITR 166 (SC)(Paper Book No. 11 Pg. No. 73-80) and KEC International Ltd. Vs. DCIT (2012) (20 ITR 282/(2013)58 SOT 18(URO) (Mum)(Trib) (Paper Book-11 Pg. No. 81-89) wherein it was held that for the allowability of deduction on account of bad debts, it was not necessary for assessee to close individual account of each debtor in its books and it would suffice if amount had been reduced from debtors balance shown on asset side of balance-sheet at close of year (AY 1999-2000) 6. With regard to the disallowance of ₹ 10,80,654/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT VS. Maharashtra Scooters Ltd. (1997)(228 ITR 78)(Mum)(Trib)(AT) and ITO VS. Texmac Engineers (1991)(39 TTJ)(Ahd.)(365(Paper BookNo.11Pg.No. 115-119) This fact that the issue is decided by third members shows that issue was a debatable one which does not entail penalty u/s 271(1)(c) of the Act. The Ld. Counsel further, submitted that it is settled principle of law as laid down in the case of CIT Vs. Reliance Petroproducts (P) Ltd. (2010) (322 ITR 158)(SC)(Paper Book No.11 Pg. No. 120-129) that merely because assessee had claimed some expenditure, which claim was not accepted was not acceptable to revenue, that by itself would not attract penalty u/s 271(1)(c) of the Act. So far reliance by revenue above on the decision of the Dharmendra Textile Processor (supra). The Ld. Counsel submitted that this decision was considered by Hon ble Supreme Court in the case of UOI Vs. Rajasthan Spinning weaving Mills (SC)(2009)(224 CTR 1)(SC) wherein it was held that the penalty proceeding and assessment proceeding are separate and distinct and penalty is not automatic. In view of the aforesaid submissions/argument, the Ld. Counsel prayed that the appeal of the assessee may be allowed and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persuacing value and any finding recorded in the assessment order does not mean that penalty has to be imposed automatic. Explanation-1 to Section 271(1)(c) of the Act provides that the penalty would be deemed to attract where in respecty to that fact material is computation of income either no Explanation is offered, or Explanation offered is found to be false in the case of the assessee. The assessee has made the disclosure of provision for bad debts in the profit and loss account and balance-sheet (Paper Book 8-11). The perusal of the same reveals that the debtors are actually reduced from debtors provisions is actually written off, therefore, the claim for disallowance for provision for doubtful debts amounting to ₹ 8,97,677/- is allowable in the light of the decision of Hon ble Supreme Court in the case of Vijaya Bank Vs. CIT (supra) wherein the Hon ble Supreme Court has observed as under.: - 'Whether it is imperative for the assessee-bank to close the individual account of each of its debtors in its books or a mere reduction in the Loans and Advances or Debtors on the asset side of its balance sheet to the extent of the provision for bad debt would the suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. The Ld. Counsel has placed reliance on the decision of Hon ble Calcutta High Court in the case of CESC Ltd. Vs. CIT (2015)(235 Taxman 6 (Cal) (High Court) (Paper Book No.II)(Pg. No. 90-96) where in it was held that the provisions of Section 43B of the Act are not applicable to the electricity duty. We further find that the assessee has claimed the deduction of electricity duty on accrual basis as gross sales of electricity was creditors to P L Account. Further, the said amount has been offered to tax in the next A.Y. 2014-15 as electricity duty was not paid due to dispute. The Ld. Counsel has said that the case law as discussed in its submission in the aforesaid part of this order wherein it has been held that the penalty u/s 271(1)(c) of the Act cannot be made to the disallowance u/s 43B of the Act if, full particulars of income are disclosed by assessee. Similarly, the assessee did not offer to tax the same of ₹ 3,74,823/- being sales tax set off for tax on the ground that the same may be offered to be tax when the sales tax assessment order are passed. Further, this system of accounting was regularly followed by assessee. Therefore, the system of accounting followed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
